NEW YORK STATE RURAL ADVOCATES

The State Joint Budget Conference subcommittee that includes housing has met and agreed not to repeal the  RPP and NPP Statutes, agreed to restore the funding for each side of the program to last years levels and to fund each coalition. The Governor was part of the negotiations and part of this agreement.  In addition, the Governor’s proposed funding levels were increased  to the State housing trust fund by 3.2 million, 2.2 million to the Main Street Program and 1 million to the Access to Home Program.

The Administration has been increasing its efforts to pull FY 12 budget proposals into the FY 11 CR. The Senate Democrats are almost certain to look for additional saving to get close to the House number of $60 billion in cuts. NRHC is urging rural housing advocates to contact their Senators to urge opposition to the 80% reduction in section 502 and elimination of self help housing.  Congress should not approve these reductions in either the FY 11 Continuing Resolution or the FY 12 Agriculture Appropriations Bill.

NATIONAL RURAL HOUSING COALITION

1331 G Street, N.W., 10th Floor, Washington, DC 20005 • (202)393‐5229 • fax (202)393‐3034 • http://www.ruralhousingcoalition.org

February 23, 2011

The Honorable Tom Vilsack

Secretary, U.S. Department of Agriculture

1400 Independence Avenue, SW

Washington, DC 20250

Dear Mr. Secretary:

I write to indicate our opposition to the Fiscal Year 2012 Administration budget for the Rural Housing Service. Of particular concern is the proposed reduction in section 502 direct loans from $1.12 billion to $200 million and elimination of the Mutual and Self-Help Housing program. These programs have been the bedrock of the long time effort to improve housing conditions in rural America. Without these programs, USDA will be out of the business of providing affordable housing for low income families and improving housing conditions in smaller, poorer rural communities.

It is disappointing to see the Department give up on the section 502 direct loan program. No other federal home ownership program can match the profile of the families served:

approximately 60% of the families receiving section 502 loans have incomes of less than 60% of the median income. By law, 40% of families participating in the program have incomes that do not exceed 50% of the median income.

Despite serving families with limited economic means, the section 502 direct loan program is the most cost effective affordable housing program in the federal government. In FY 10, the total per unit cost for a homeownership loan to a low income family was less than $5,000. This stands in sharp contrast to many other comparable federal programs with annual costs exceeding the total federal expense of a section 502 direct loan.

The budget indicates that the section 502 guarantee program is an adequate alternative. It is not.

The average annual income for families receiving the guarantee is $48,000. Only about 5% of families receiving guarantees make between 60-70% of the median and the majority of the loan guarantees go to households with incomes at or above 100% of the median.

There are two factors that determine the extent to which low income families receive guaranteed loans. One is the low interest rate environment that is clearly coming to an end. Interest rates are on the rise and with this the limited utility of the guarantee for low income households will be further diminished. The other is geography. According to the Economic Research Service:

“Of the large rural development programs, the one least targeted to distressed and rural areas is

the Low Income Housing Loan Guarantee Program. This program’s per capita funding is

correlated with higher local employment and lower local poverty, and it provides more funding

per capita to non-metro counties that have lower shares of population that are rural.”

It is a just a fact that the guaranteed loan under section 502 will not serve the vast majority of the families who are eligible under the direct program.

It is equally disheartening to see the Administration propose to end the Mutual and Self-Help Housing, which takes the rural tradition of barn raising and applies it to providing housing opportunities for families with limited economic means. Currently, more than 100 organizations across America participate in the self-help housing program. These organizations support groups of eight to 12 self-help families who construct each other’s homes, performing approximately 65% of the construction labor. Through this“sweat equity”, each homeowner earns equity in his or her home, decreasing the cost burden and increasing the investment in their community. Despite being the poorest families in the section 502 portfolio, self- help families have the lowest rates of default and delinquency.

For the last three years, self-help housing organizations have constructed about 3,500 homes. This construction has led to over 11,000 jobs, more than $738 million in local income and $77 million in taxes and revenue in rural communities across the country.

In conclusion, with an overall FY 12 budget of $145 billion and $24 billion in discretionary appropriations, it is hard to believe that USDA singled out these two successful programs for such rough treatment. For a very small fraction of the budget, USDA could provide homeownership opportunities to 10,000 rural families with limited means, supply a needed capital boost to flagging economies in small communities and reward those who, after working all day and all week, were willing to spend their nights and weekends building their own home.

Budgets are all about choices and this rural housing budget is certainly the wrong choice for rural America.

Sincerely,

Robert A. Rapoza

Executive Secretary

ALL Preservation Companies should try to be in Albany on Tuesday, March 1 at 12:00 PM to present testimony on the RPC/ NPC Program. Reserve your slot by faxing the  public hearing notice  for the March 1, 2011 hearing

1. The Executive’s legislative proposal gives extensive authority over the operation of the program to the Commissioner of the Division of Housing and Community Renewal (DHCR) without express guidelines and limitations. Does the Executive have a plan regarding how these programs would operate in the future? What results are anticipated to follow the delegation of this discretion to the DHCR?
2. Are there ways to improve the oversight and review of the Neighborhood and Rural Preservation Companies? Could the Neighborhood and Rural Preservation Coalitions play a role in facilitating oversight and communication?
3. Are the different areas and population groups of the State served equitably? If not, what areas of the State or populations are not being served or are underserved?
4. What methods exist to provide incentives to Neighborhood and Rural preservation companies to provide new services in underserved areas? Are there incentives that would lead the companies to streamline their operations, to merge or to otherwise change their composition to more effectively meet their goals?
5. Could current policies be modified to make the Neighborhood and Rural Preservation Programs more effective and efficient? If so, what policy changes would allow for these improvements to be made and what, if any, would such policy changes cause

There are substantial cuts proposed in the USDA budget fy 2012 (from NRHC)

• The Budget proposes a reduction in section 502 from $1.12 billon to $200 million;
• The budget indicates that the section 502 guarantee can pick up the slack. There is not any evidence that the guarantee, which does not include an interest subsidy, can reach very low income borrowers. The guarantee’s limited utility for low income borrowers is likely to be further diminished in a climate of rising interest rates;
• There is substantial evidence from USDA’s own Economic Research Service that the guarantee does not work in more rural,  poorer communities and is the least available to economically distressed and lower income communities and is the ‘worst-targeted’ of all USDA guarantees;
• With interest rates on the rise, the guarantee will continue to only reach those in higher income communities with higher incomes; and

• The essence of budget proposal is to bring to an end the most cost effective affordable housing program in the federal government. The section 502 direct program provides 10,000 loans to families with very limited means so that they may acquire or build their own home.   The budget does not provide a plausible alternative to the section 502 direct loans.

NLIHC reports cuts of

• 10% from the HOME program.
• 66% from the Community Development Block Grant program (CDBG)

Attendance has not been limited, however.  If you want to attend and bring 7 copies of written testimony, that is fine. Testimony will also be accepted  in the mail to 923 LOB. These hearings focus on the State Housing Budget, not the preservation program itself.

The Governor has proposed RPC_NPC Consolidation-1 that would include activities currently undertaken by both rural and neighborhood preservation programs.

This would be governed by a new statute, proposed Article XXVII

It looks like the Governor has proposed to zero out the rural preservation program and allow rpcs to compete for NPC funds that have been cut to six million dollars.

That means that six million will be available for both RPCs and NPCs in a competitive, performance based nofa

Joint Legislative Budget Hearings have been scheduled for the housing budget on 2/16 in Hearing Room B beginning at 1 PM.  We urge you to testify on the importance of State dollars for affordable housing in your community.  Contact Clinton L. Freeman, Jr.(518) 455-5491 to get on the roster for a ten minute slot. 40 copies are needed if you are testifying in person.

You may submit your testimony by mail within 7 days. Better yet, bring your written testimony to Albany on 2/15 and we will deliver it for you.  Seven copies are needed – so save your pennies and we will walk them over for you!

NYS Governor Andrew Cuomo will present his budget on Tuesday, 2/1  at 1:00 PM